Zynga Tweaks Accounting Method in New SEC Filing

Revenue was boosted by $27.3 million

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In preparation for its upcoming IPO, social gaming company Zynga submitted its third amended regulatory filing, revealing that it had “tweaked” an accounting method to boost revenue by $27.3 million.

According to the New York Post, the amended S-1 filing allowed Zynga to avoid claiming a second-quarter loss. By shortening the estimated average life of its virtual goods from 14 months to 11 months, Zynga’s revenue for the first half of the year rose past $500 million, putting it on the $1 billion track for the year. It also allowed the company to report a net income of $1.8 million, instead of a loss of between $1 million and $2 million.

But the accounting acrobatics couldn’t cover up some other less-than-encouraging numbers, like Zynga’s 90 percent drop in profits this quarter, which fell to $1.3 million compared with $13.9 million a year ago. Zynga also reported its first-ever decline in bookings, made up of the total revenue from ads and virtual goods sales. User numbers fell last quarter as well, dropping to 59 million—a 4.8 percent decline from the previous quarter. Meanwhile, total costs and expenses rose to 95 percent of revenue, the company’s highest since it became profitable in spring 2010.

Zynga blamed the profit slowdown partly on the fact that it didn’t release any new hit games in time to affect results shown in the filing.

@adweekemma emma.bazilian@adweek.com Emma Bazilian is Adweek's features editor.
Publish date: September 26, 2011 https://dev.adweek.com/digital/zynga-tweaks-accounting-method-new-sec-filing-135239/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT